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FACTORS

Economic Performance

Government Efficiency

Public Finance

Tax Policy

Institutional Framework

Business Legislation

Tariff Barriers

Protectionism

Public Sector Contracts

Foreign Investors

Capital Markets

Investment Incentives

Societal Framework

Business Efficiency

Infrastructure

INTRODUCTION

Investment Incentives are the Indicator under Sub-Factor Business Legislation, under Factor Government Efficiency.
The Investment Incentives is a government policy that encourages the formation of new businesses and encourages current businesses to expand rather than relocate.
This Investment incentive will, in general, determine whether or not our government can attract more Foreign Direct Investment (FDI).

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METHODOLOGY

Foreign Direct Investment Indicator

Fiscal Incentives - Corporate Tax Exemption, Tax Allowances
Financial Incentives - Financial assistance such as training and R&D grants
Other Incentives - Liberal foreign exchange administration policies and prevailing regulations on foreign workers.

Ranking Measurement

The Investment Incentives rank is measured from the score from the Executive Opinion Survey (EOS) which was conducted from Middle to Upper-Class Management from the various sector and industries covering all economic sectors. The survey required participants to answer the question on a scale from 1 to 6. The average value for each economy is then calculated and converted into a score from 0 to 10.

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DATA IMD WORLD COMPETITIVENESS YEARBOOK

Malaysia’s Investment Incentives rank moving upward from number 10 in 2011 to number 5 in 2012 and 2013. The year 2014 also shows Malaysia move upward to number 4. This indicates that Malaysia is attractive for foreign investors to invest in. However, the ranking has been declining since 2015, with the country falling from sixth place in 2016 to 39th place in 2021. This implies that Malaysia is no longer a preferred destination for foreign investors.

The performance of Malaysia's Investment Incentives is also reflected in the score value. In 2012, the score increased to 7.71, a rise from 7.13 in 2011. Despite the fact that the rank remained the same in 2012 and 2013, the score value dropped to 7.56 before rising back to 7.68 in 2014. Since 2015, the score value has been decreasing, reaching 5.76 in 2021.

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DATA FOREIGN DIRECT INVESTMENT

FDI recorded RM14.6 billion net flow in 2020 which shows a significant decrease of 54.8% from the previous year 2019 which is RM32.4 billion. This is partly from the global economic uncertainties due to the Covid19 pandemic situation.

However, the Investment Income is drastically dropped from RM 60.5 billion in the year 2019 to RM 44.6 billion in the year 2020.

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KEY REGULATORS/INSTITUTIONS

No.	Regulator/Institution	Function	Policy/Regulation/Guideline
1	Ministry of International Trade and Industry (MITI	To develop and implement policies on industrial development, international trade and investment To attract quality foreign and domestic investments	ASEAN Free Trade Agreement (AFTA) Regional Comprehensive Economic Partnership (RCEP) National Policy on Industry 4.0 (Industry4WRD) 12^th Malaysia Plan (RMK12) Promotion of Investments Act 1986 The Industrial Coordination Act 1975 Free Zones Act 1990 Companies Act, 2016
2	Ministry of Finance (MOF)	To formulate and implement fiscal and monetary policies in order to ensure effective and efficient distribution and management of financial resources.	National Economic Recovery Plan (PENJANA) Income Tax Act 1967 Customs Act 1967 Excise Act 1976
3	Malaysia Investment Development Authority (MIDA)	MIDA is an agency under MITI which responsible to oversee and drive investments into the manufacturing and services sectors in Malaysia	China Special Channel Project Acceleration and Coordination Unit (PACU) Circular Bioeconomy Unit Digital Investment Office (DIO) MyDIGITAL Blueprint National Investment Aspirations
4	Bank Negara Malaysia (BNM)	BNM continues to maintain a liberal foreign exchange policy (FEP), which is part of its broad prudential toolkits to maintain monetary and financial stability.	Liberalisation of Foreign Exchange Policy (FEP)

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EXISTING POLICIES/REGULATIONS

EXISTING INCENTIVES	DETAILS
Pioneer Status (PS)	Pioneer Status is an incentive in the form of tax exemption that is granted to companies participating in promoted activities or producing promoted products for a period of 5 or 10 years.
Investment Tax Allowance (ITA)	Investment Tax Allowance is an incentive granted based on the capital expenditure incurred on industrial buildings, plants, and machinery used for the purpose of the promoted activities or the production of the promoted products. This incentive is generally given for a period of 5 or 10 years.
Income Tax Exemption	Tax exemption granted to companies that undertake certain business activities
Reinvestment Allowance (RA)	Reinvestment Allowance is available for companies engaged in a selected sector that have been or will be in operation for at least 36 months.
Accelerated Capital Allowance (ACA)	The Accelerated Capital Allowance is a tax incentive scheme that promotes investment in energy efficient products & equipment.